Independents oppose vertically integrated companies’ request for SRDU exemption

A request by Bell Canada and Shaw Communications Inc. to be exempt from satellite relay distribution undertakings’ (SRDUs) licensing requirements has been met with strong opposition from independent broadcasting distributors. In comments submitted to the CRTC’s consultation filed July 11, the two companies argued that technology advances—such as cable broadcasting distributors connecting by fibre and others accessing more signals by using their own satellite dishes—have created enough competition in the signal market, making licensing requirements unnecessary. “With the emergence of DTH and changes to the SRDU licensing framework to allow for competition in the late 1990s, the development of extensive terrestrial fibre networks for the relay of signals, and the lifting of restrictions on what cable operators are required to source from licensed BDUs, the need for licensing of SRDUs no longer exists,” Bell wrote in its submission. The company also wrote that “it is not clear the licensing of SRDUs contribute in a material manner to the implementation of broadcasting policy in the Act.” Bell requested to be exempt from licensing requirements as terrestrial relay distribution undertakings (TRDUs) are. Satellite and terrestrial relay distributors deliver wholesale programming services to broadcasting distributors. Under the present licensing conditions, the commission does not require terrestrial relay distributors to contribute five per cent of gross revenues to Canadian programming funds—an exemption both Bell and Shaw are after for their satellite relay services. “Unlike the proposed SRDU exemption order, the TRDU exemption order does not contain provisions which specifically require the Commission's detailed oversight, such as the requirement to file annual returns and the requirement to contribute 5 per cent of gross revenues to Canadian programming,” Bell wrote. Shaw said terrestrial relay distributors are often operated by large broadcasting distributors—rather than small, new entrants—which compete aggressively with satellite relay distributors. The company said the exemption for terrestrial relay distributors creates a competitive disadvantage for the satellite relay distributors. But smaller independent broadcasting distributors submitted comments to the commission arguing that the satellite relay distribution market is not competitive enough to permit such licensing exemptions. Christopher Edwards, vice-president of corporate and regulatory affairs at the Canadian Cable System Alliance (CCSA), said in an interview that in the present vertically integrated market, it is important for the CRTC to maintain its control. “Bell acquired CTV and Shaw acquired CanWest in what the industry refers to as the vertical integration,” said Edwards. “We’re concerned as the representative of a small cable distributor that it’s exactly the wrong time for the commission to be reducing the possible remedies that are available if these guys were to somehow misbehave.” Edwards told The Wire Report that in a vertically integrated market, it would be very easy for the two major companies to raise their programming prices and, essentially, “drive the smaller companies out of the market.” In Shaw’s case, for example, Edwards said that as it owns both the programming service and the satellite relay distribution service, it could set any wholesale price without a commission requirement, making it difficult for smaller cablecos to roll out programming to the rural Canadians they serve. Shaw or Bell could raise the direct-to-home service prices charged to independent broadcasting distributors so the smaller distributors’ customers find them unattractive and leave to obtain service from the larger incumbent companies, Edwards said. “It’s raising the price of SRDU and restricting the services available to our members,” he said. “ are among the ways that these vertically integrated enterprises can make competition very difficult for our members.” Edwards said the commission needs to keep all of its available tools. FreeHD Canada also submitted comments to the CRTC last week, saying that it does not support the acceptance of an exemption order. Like the CCSA, FreeHD said it is concerned with the fate of independent broadcast distributors if licensing conditions are removed. In its comments, the company wrote that vertical integration offers many ways for satellite relay distributors to lessen market competition. “Vertically integrated SRDU businesses are one of the easiest and most likely vehicles to provide cross-subsidizations, margin squeeze, and market foreclosure to the detriment of competing BDUs and programming services,” FreeHD wrote. The company also wrote that many rural broadcasting distributors serving hotels, motels, or temporary camps, for example, rely on satellite relay distributors for their content signal. FreeHD wrote that “these ‘satellite-reliant’ BDUs number well over 1,000 head-ends, and are often located in rural areas where they have no competitive offering from TRDUs—and will likely never economically be served by other means.” The company requested that the commission continue to license satellite relay distributors. The CRTC opened a consultation on the requested exemption order in May. The deadline for comments passed on July 11, with 15 different companies submitting interventions. dgrenier@thewirereport.ca

Independents oppose vertically integrated companies’ request for SRDU exemption

Broadcast | July 21, 2011

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